Waterlogic has bottle to tap new markets  

People carrying and drinking water from plastic bottles have become a pervasive feature of modern life, on public transport, in the workplace and at home. But that could all change, if entrepreneur Jeremy Ben-David, co-founder and chief executive officer of recent AIM arrival Waterlogic, has his way.

The Dublin-based and internationally focused company, which raised $65 million (£40.6 million) at 145p for its oversubscribed AIM float in July and recently reported a 53 per cent interim pre-tax profits lift to $2.3 million on turnover up 30 per cent to $39 million, insists that the future lies not in bottling water but in purifying water for dispensing at the point of use. Waterlogic filters it, removing the need to add chlorine and other potentially harmful chemicals and reducing its time at germ-exposed taps to only 0.8 of a second.

Ben-David explains that the company is busy commercialising its Firewall UV (ultraviolet) technology. Waterlogic has patents pending on Firewall UV, as the only technology in the point-of-use dispenser market certified as able to guarantee 99.99 per cent pure water. The company, which ended June with cash of £3.3 million after buying Europe-wide water accessories distributor Aqua among other strategic acquisitions, is looking for other opportunities to increase its penetration of the market, and in particular to extend its customer base from businesses and organisations to domestic households.

Of Israeli parentage and brought up in the Far East, Ben-David first had the idea of breaking the mould in this $14 billion worldwide industry when he was doing an MBA course in France.

Now Waterlogic, which seven years ago ended its production joint venture in Korea and moved its facilities to China, has been pushing up sales and margins in its main markets, Western Europe and the USA, wants to target the consumer market. Chaired by its other founder, American Ariel Recanati, the acquisitive company, which bought sector player Innotech as well as Aqua Cure in the spring, says it is ready to launch three new product ranges and is working on more potential ‘earnings-accretive’ takeovers.

Waterlogic now sells point-of-use water purifying dispensers, largely to the office and professional sectors, but it also supplies wider markets that include hotels, nursing homes and gyms. It has an installed base of 491,000 dispensers with a particular bias towards the US and Western Europe, which account for a combined 95 per cent of its sales.

The company has grown over recent years thanks to good organic growth and acquisitions that have broadened its base in countries such as Germany, France, Norway and Denmark. Waterlogic maintains that the market has shifted from large five-gallon type bottles delivered into offices to stand-alone dispensers that purify the mains water supply.

Estimates suggest the global installed base of dispensers to be ten million units, of which eight million are bottled water units. Waterlogic reckons that demand for its products will increase significantly, as it takes market share from the bottled water market.

Ben-David is optimistic about the use of its Firewall technology to remove viruses and bacteria. Waterlogic recently entered into a deal with a major European water utility that is assessing its use for the residential market.

Waterlogic distributes machines directly by way of a rental model and also via a large network of dealers that spans almost 50 countries. Ben-David says Waterlogic, which achieved pre-tax profits of $7.1 million on sales of $68.3 million, has enough cash for 18 to 24 months. However, given its need for acquisitive growth, the company does not plan to start paying dividends for two years.

Brokers see the company making slightly more this year, with a big jump to $14.1million pre-tax in 2012, as its expansion policy pays off. Now 191p, the shares could fare well over the medium to long term.